Foreign banks, including HSBC, threaten to close accounts over Iran cargo insurance cover

NEW DELHI: State-run general insurers say several foreign banks have threatened to close their accounts as they aim to provide cover to Indian ships ferrying oil from Iran.

While these insurers say they have insured the ships on the directions of the government, the foreign banks see the move as a violation of economic sanctions imposed on Iran.

Seeking the government's intervention, the insurers say deactivation of their accounts will hurt their foreign operations as banks in many countries also act as brokers.

"Why should we be penalised," asked an executive director with a state-run general insurer. "We are only following government directives," he said, adding that if the banks take unilateral action, the Indian government should not allow them to operate in the country.

Some of the foreign banks have shared their concerns with insurers on what they perceive as violation of the sanctions, said a senior executive with General Insurance Corporation (GIC), a government-owned reinsurer.

Among these banks is HSBC, which has given a 30-day notice to close New India Assurance's Dubai account. AR Sekar, its officiating CMD, confirmed the development but refused to elaborate, saying, "We are in discussion with the concerned parties." An email sent to HSBC Dubai did not elicit any response till the filing of this story.

Earlier this year, the finance ministry had allowed domestic general insurers to provide insurance and re-insurance protection to Indian ships transporting crude from Iran to India.

In its directive, the ministry had said that GIC can seek re-insurance from re-insurers operating in other countries, which are importing oil from Iran and offering similar protection to their ships.

The directive came after European insurance firms stopped providing cover to Indian cargos from July because of the Western sanctions on Iran.

"Have these banks stopped dealing with Japanese, Chinese or South Korean firms, which have transactions with Iran?" an executive director with a state-run general insurer said. "Why double standards with Indian insurers?," he said.

Japan has offered its shippers cover of $7.6 billion per tanker through government-backed insurance.

A finance ministry official said that the government only recognizes sanctions imposed by the United Nations and the question of revoking its directive does not arise.

"The oil ministry is still considering a sovereign guarantee request," the official said. "It is a business decision of foreign banks," he added. The cost of providing insurance cover for hull and machinery, besides indemnity insurance works out to $200 million. India is among seven countries that secured a waiver from the US sanctions after they significantly reduced oil imports from Iran.